Industrial Development in China

G. Astafyev

This spring is a noteworthy one for the Chinese people. The spring
of
the first year of their first five-year plan, it marks the end of the
period of rehabilitation and the beginning of wide-scale economic
development on planned lines.

The Chinese people, led by their Communist Party, required only
three
years to carry out momentous democratic transformations, to repair the
ravages caused to their national economy by twelve years of war, and
radically to alter the economic situation in their country. These
historic achievements were won at a time when the Chinese people were
engaged in beating off external armed aggression and in crushing the
fierce resistance of their class enemies at home.

In the little over three years since the foundation of their
People’s
Republic, they have carried out agrarian reform, fully restored their
agriculture, industry and transport and put an end to inflation. For
the first time in China’s history, its budget has been balanced and the
living standards of the people are steadily rising. Could better
evidence be required of the virility and progressive character of the
people’s democratic system?

The enemies of the Chinese people were sure that, while the latter
may
have vanquished the reaction politically, they would not be able to
cope with economic dislocation and would have to go hat in hand to the
imperialists. To them, the victory of the Chinese people on the
economic front is surprising and incomprehensible. Yet the Chinese
Communists, armed with a knowledge of the laws of social development,
had pointed out several years ago that, with the united efforts of the
people, consolidation of the people’s democratic regime, and
cooperation with the Soviet Union and the other countries of the camp
of socialism and democracy, a fundamental improvement in the country’s
economic situation could be brought about in a short time.

Speaking in June 1950 at the third plenary meeting of the Central
Committee of the Chinese Communist Party, Mao Tse-tung said: “Three
conditions are required for the financial and economic situation to
take a fundamental turn for the better. These are: 1) completion of
agrarian reform; 2) proper readjustment of existing industry and
commerce; 3) large-scale economies and reduction in expenditure by
government organizations.... This will take about three years or a
little longer.”

Thanks to the united efforts of the Chinese people, led by the
Communist Party, this fundamental turn for the better has been brought
about in considerably less than three years. The conditions specified
by Mao Tse-tung have been attained.

Completion of Agrarian Reform

Politically and economically, agrarian reform is the most important
of
the democratic reforms in the present stage. It has already been
carried out in an area with a population of 450 million, and only
remains to be introduced in a few national-minority regions.

The agrarian reform has done away with the landlord class, the
principal support of feudal reaction and foreign imperialism. The land,
agricultural implements and houses of the landlords have been turned
over without compensation to the poor peasants and agricultural
labourers. By August 1952 the peasants had received some 47 million
hectares of arable land confiscated from the landlords. In addition,
they were relieved of paying extortionate rents amounting to an
equivalent of 30 million tons of cereal a year.

The Chinese countryside has changed beyond recognition. The peasants
are no longer subject to the ruthless exploitation of bloodsucking
landlords. Most of the poor peasants and farm labourers, who formerly
constituted 70 per cent of the peasant population, have now risen to
the status of middle peasants. The agrarian reform, carried out under
the supervision of the working class and its Communist Party, has
substantially improved the conditions of the great mass of the peasants
and has further strengthened the alliance between the working class and
the peasantry, the foundation of the people’s democratic system in
China. Thus has been built the political basis on which it is now
possible to pass to broad-scale economic development.

In carrying out the agrarian reform, the rural workers of China, the
peasants, had to smash the fierce resistance of numerous class enemies.
But, led by the working class and its Communist Party, they have
successfully coped with all difficulties and the agrarian reform is now
consummated.

The reform has given a powerful stimulus to the broad development,
on
strictly voluntary lines, of agricultural mutual aid teams and
producers’ cooperatives. In 1952, over 65 per cent of the peasant
families in the old liberated areas (in Northeast China – 80 per cent),
and about 25 per cent in the new liberated areas were working together
in mutual aid teams. From these groups springs a higher form of
agricultural cooperation – peasant producers’ cooperatives, of which
there were four thousand at the close of 1952.

Another new phenomenon in Chinese agriculture is the establishment
of
more than two thousand state-owned farms employing up-to-date machinery
and the most advanced agricultural methods, and serving as educational
centres in scientific farming for the surrounding peasantry. The first
experimental machine and tractor stations are also being set up.

Agrarian reform released the productive forces of Chinese
agriculture
from the shackles of semi-feudal relations of production and created
the conditions for its rapid rehabilitation and development. Witness
the steady increase in agricultural output: in 1952, compared with
1949, 40 per cent more foodstuffs were produced, 200 per cent more
cotton, etc.

The process of agricultural rehabilitation in China is now
completed.
Nine per cent more food, and over 55 per cent more cotton, were grown
in 1952 than in the prewar peak year. The country is no longer under
the necessity of importing many of the agricultural raw materials it
imported before, and is already itself in a position to export not only
tea and silk (which it did formerly), but also foodstuffs. There is no
overestimating this achievement in a country where in the past hunger
was the cruel lot of millions of people.

With the progress of agriculture and the rise in peasant living
standards, commodity exchange between town and country is broadly
increasing, the market for industrial manufactured goods is expanding,
and industry is being supplied with ever larger quantities of
agricultural raw materials. Bigger farm output means bigger government
revenue. All this has created favourable conditions for the
comprehensive development of agriculture, which continues to remain the
principal branch of China’s economy.

Role of the
State-Owned Sector

After the victory of the people’s revolution in China, the big
industrial plants, commercial houses, banks, and means of transport and
communication belonging to bureaucratic capital, to the Four Families,
passed into the possession of the people. Since then, the Communist
Party and the Central People’s Government have done their utmost to
expand the state-owned sector and to consolidate its leading position
in the country’s economy.

As a result, the state-owned sector has in these three years become
the
predominating factor in industry, transport, banking, foreign trade and
wholesale domestic trade, in 1952 it already accounted for over 60 per
cent of the national industrial output (exclusive of the handicraft
industries), and for 80 per cent of total heavy industry output.

The state, that is the people, owns all the railways, upwards of 60
per
cent of the marine and inland waterway tonnage, and the greater part of
the motor transport facilities. All the Chinese banks are under
government management. The People’s Bank of China, in which 90 per cent
of the deposits and loan operations are concentrated, is the bank of
issue and controls currency and credit. Foreign trade is entirely
controlled and regulated by the government, nine tenths of the export
and import operations being handled by government agencies. The
government likewise conducts all domestic wholesale operations in major
commodities – cereal, cotton, cotton yarn and cloth, capital goods and
export goods. In 1952, government and cooperative organizations were
already handling 30 per cent of the retail trade.

The increasing weight and influence of the state-owned sector in the
national economy enables the people’s government to an ever larger
extent to regulate production and prices, and to direct the activities
of the private-capital sector and the small-commodity sector in the
interests of the people.

The state-owned sector has played an important part in the
rehabilitation of agriculture and the promotion of its further
progress. Thanks to the system of stable, government- fixed prices and
government wholesale purchases, and to the expansion of trade between
town and country, the regulating and stimulating role of the
state-owned sector in the entire national economy will increase as time
goes on. This will contribute to the further progress of agriculture,
to the raising of the peasants’ living standards and to the further
strengthening of the alliance between the working class and the
peasantry.

As to the rehabilitation and development of industry, transport and
trade, the expansion of the state-owned sector has created the
conditions for the achievement in a brief space of time of progress
unwitnessed in the history of the country.

Economic Achievements

At the time of China’s liberation from Kuomintang misrule, its
industrial output was only 50 per cent of prewar. The decline was 80
per cent in iron and steel, over 50 per cent in coal, and 25 per cent
in textiles.

In 1952, output of nearly all factory-produced goods had already
reached the highest levels ever attained in the past, and in many cases
was well above them. The following figures are illustrative of the
speed of China’s industrial recovery:

Percentage of Output
to Prewar Peaks

Percentage of 1952 Output

In
1949

In
1952

To
1949

To
1951

Power

72

114

158

130

Coal

45

95

211

118

Oil

38

136

360

125

Pig iron

11

105

955

132

Steel

13

170

944

141

Cement

31

153

493

111

Tyre rubber

88*

541

615

178

Cotton yarn

72

150

208

130

Cotton cloth

73

165

226

137

Paper

85*

212

250

151

Flour

49*

106

216

117

Sugar

58*

100

173

137

Tobacco and cigarettes

83

145

175

132

Matches

74*

111

150

130

* 1950 figures

In the period 1950-52 gross industrial output more than doubled in
value. The leading heavy industries increased their output ten- or
elevenfold and greatly exceeded all previous peaks. Production
increased considerably in all the extracting industries, especially
fuel. There was a rapid increase in the production of building
materials. Output of items of general consumption was also well above
1949.

Extremely important and significant is the steady acceleration in
the
rate of increase of production. In 1952, output increases in major
items ranged from 18 to 78 per cent.

In the old China industry was of a semi-colonial character and was
incapable of satisfying the country’s needs. In many branches
production did not cover all processes from raw material to finished
product and there was a lack of balance between the various branches.
This induced the people’s government already in the process of
rehabilitation to launch on the reconstruction of existing industries
and on the building of new ones.

Old plants have been thoroughly remodelled, and at the same time new
and more perfected plants have been built and gradually brought into
operation. The lack of balance between the various branches of industry
and the uneven geographical distribution of industry are being
eliminated step by step. The iron and steel, machine-building, oil and
other formerly backward industries are being rapidly developed. The
coal industry is being reconstructed with the help of modern machinery
and more advanced methods. Thanks to the greater stress laid on the
development of the heavy industries, the ratio between the output of
means of production and output of means of consumption has changed
materially: in 1952, output of means of production constituted 43.8 per
cent of total output, as against 32.5 per cent in 1949.

The Anshan iron and steel works, the biggest in China, may serve as
an
illustration of what is being done in the reconstruction of industry.
Under the Japanese, they produced about 1,300,000 tons of steel per
annum. Almost completely destroyed by the Kuomintangites, the works
were rebuilt with the help of Soviet experts. Every phase of production
was reconstructed in the process, and it was decided to operate largely
on locally procurable iron ore. Not only were the works rebuilt in a
very short time; their output was increased and the quality of their
products improved. In 1952 output was more than 640 per cent greater
than in 1949.

The Shihtsingshan iron and steel works, near Peking, have also been
reconstructed and adapted to the advanced methods practised in the
Soviet Union. Blast furnace productivity has been increased fourfold.
The 1952 pig iron target, four and a half times as great as that of
1950, was topped by 24 per cent. Total output at the Shihtsingshan
works was 5.3 times as great, and at the Taiyuan iron and steel works
2.7 times as great as at the time of the Japanese occupation.

Big strides are also being made in machine-building. Northeast
China,
the country’s principal industrial area, is now producing mining
machinery, machine tools and power equipment. China used to import all
its machinery from abroad; now it has itself begun to manufacture
turning, milling, planing and vertical boring lathes, presses, air
compressors, electric motors, pneumatic picks, engines, diesel engines,
etc. China-made lathes and machines are already to be seen in many
factories.

New machine-building plants are being built. A heavy engineering
works
now in its third year of construction in Taiyuan, capital of Shansi
province, is making such rapid progress thanks to the devoted efforts
of its builders that they expect to finish it in four years instead of
the scheduled five.

China’s textile industry formerly depended entirely on imports for
its
machinery. But for two years now complete sets of spinning and weaving
machines are being produced at plants which were formerly repair shops.
There are six such reconstructed plants, as well as one new plant,
turning out machines for China’s new textile mills. Spinning and
weaving mills built in the past three years in Chengchou in Honan
province, Siengyang in Shensi province, Hantan in Hopeh province, and
Wuhan in Hupeh province are equipped with machines made in China. A
distinctive feature of these new mills is that they are situated in
interior cotton-growing areas, it being the endeavour of the people’s
government to relocate industry on more rational lines, to erect
production facilities in proximity to sources of raw material and areas
of consumption.

As we see, the process of industrial reconstruction already began in
the period of rehabilitation, new and modern plants being built with a
view to putting an end to the semi-colonial character of China’s
industry and the lack of balance in the development and location of
production facilities. This process is most marked in Northeast China,
the country’s principal industrial area. Here new construction began
much earlier and has been on a larger scale than in other parts of
China. Capital construction in 1952 was more than three times as great
as in 1950, rehabilitation constituting only 30 per cent of the total.
It was here, too, that the results of the effort were first felt: by
the end of 1952, the rate of industrial output in Northeast China was
3.3 times as great as in 1949, while total output was well above the
peak reached under the Japanese, when the mills and factories were
working at top speed turning out war supplies.

Big strides have also been made in transport. The transport system
inherited by People’s China was completely wrecked. In 1947 only 6,884
kilometres of railway were in operation. Most of the highroads had
likewise fallen into complete disrepair. In 1950-51 the length of
operating railway line was raised to 23,785 kilometres. Since 1949,
32,438 kilometres of highroad have been repaired, 1,100 kilometres
newly laid, and total length of highroad has been raised to 112,000
kilometres.

Rehabilitation of the railways was already completed in 1950, after
which People’s China began to overhaul its whole railway system and to
build new lines. Reconstruction of track, new rolling stock and
introduction of advanced operation methods have increased the railway
carrying capacity considerably. In 1952, China’s railways carried 131
million tons of freight, or 61 per cent more than before the war. Two
new lines – from Chungking to Chengtu and from Tienshui to Lanchow, a
total of 865 kilometres – the construction of which was begun in 1951,
were completed ahead of schedule. This has made it possible to start
work earlier than originally projected on the extension of these lines–
from Tienshui to Chengtu and from Lanchow to Sinkiang. A line from
Fengtai to Shacheng in Hopeh province is also under construction.

The importance of the rehabilitation of the railway system and the
rapid building of new lines in a country as vast as China can scarcely
be exaggerated. Its far-flung areas are being brought together in one
system. Growth of trade intimately depends upon extension of the
railways, which constitute the arterial system of the national economy.

Rehabilitation and development of agriculture, industry and
transport
have created the conditions for a broad expansion of trade. In 1952,
total turnover of government, cooperative and private industrial and
commercial enterprises increased by two fifths. Compared with the
previous year, the government trading system alone sold 41.4 per cent
more cotton cloth, 47.5 per cent more paper, 55.1 per cent more sugar,
103.4 per cent more butter, etc.

Particularly significant is the enormous increase of trade with the
rural districts. In Northeast China, peasant purchases of manufactured
goods increased tenfold in the three years, while government purchases
of agricultural produce increased 3.7 fold.

China has greatly enlarged its foreign trade. In 1951 it was twice
as
great as in the previous year and reached the prewar peak. For the
first time in many years China had a favourable balance of trade. The
increase continued in 1952, mainly due to further expansion of
commercial intercourse with the Soviet Union and the People’s
Democracies, who in that year accounted for 72 per cent of China’s
total foreign trade, compared with 26 per cent in 1950.

These facts and figures show that by the end of 1952 the Chinese
people
had also achieved, ahead of schedule, the second condition specified by
Mao Tse-tung, namely, proper readjustment of existing industry and
commerce.

The Budget and What It
Indicates

The Chinese people have been equally successful in achieving the
third
condition, one of the major requisites for a transition to broad
economic development – large-scale economies and reduction in
expenditure by government organizations.

At the time of the liberation the finances of the areas which had
been
under Kuomintang rule were in a state of complete chaos. The measures
taken by the People’s Government to centralize finances and to regulate
revenue and expenditure made it possible already in 1950 to balance the
budget, halt inflation and stabilize commodity prices. Other financial
measures resulted in the establishment of a single and sound currency
for the whole country. This made possible the systematic reduction of
prices, the first steps in this direction being taken in 1951 and 1952.

The fact that in 1950, the year after the establishment of people’s
democratic government, revenue and expenditure were balanced and the
budget deficit eliminated, for the first time in the country’s history,
speaks eloquently of the healthy progress made by the national economy
of the Chinese People’s Republic. This is also clearly reflected in the
steady growth of the budget.

Taking 1950 as 100, national revenue rose to 204.6 in 1951, and to
271.6 in 1952; expenditure correspondingly rose to 174.8 and 239.7. In
1952, revenue considerably exceeded expenditure (by 26,060,000 million
yuan), the carryover to 1953 amounting to 30,000,000 million yuan.

Both the revenue and expenditure sides of the national budget reveal
profound changes in the structure of China’s economy. Profits of
state-owned enterprises and taxes paid by state-owned and cooperative
enterprises accounted for 34.1 per cent of the total revenue in 1950,
and 56.3 per cent in 1952; proceeds from the agricultural tax declined
in the same period from 29.6 per cent of total revenue to 17.1 per
cent, while taxation of private enterprises yielded 32.9 per cent and
24.1 per cent of total revenue respectively. An analysis of national
expenditure reveals a progressive increase of allocations for economic
development and social and cultural services. In 1952, the former were
4.2 times as large, and the latter nearly three times as large as in
1950; expenditure for defence and for the civil service increased in
the same period by only 50 per cent.

The financial achievements of the people’s government are not only
due
to the rehabilitation and progress of industry and agriculture. They
are also due to the effort of the whole people to ensure strictest
economy of government funds and to secure accumulations over and above
the plan. A campaign in this direction was initiated by the workers of
Northeast China in 1951. In this region alone it resulted in 1952 in
additional accumulations equivalent in value to 11.5 million tons of
cereal. In that year four of the six big administrative areas achieved
additional accumulations amounting to upwards of 22,000,000 million
yuan, which Chinese economists estimate would be sufficient to build
25,000 kilometres of railway line.

The rehabilitation and development of all branches of the economy is
accompanied by a steady improvement in the living standards of all
sections of the people – workers, peasants, intellectuals and petty
bourgeois.

Reference has already been made to the growing prosperity of the
Chinese peasant, now that the agrarian reform has emancipated him from
semi-feudal exploitation and ruin. In the three years of existence of
people’s government, the living standards of the working class have
also risen considerably. The number of persons employed in production
is steadily increasing, and now totals 15 million, 10,200,000 of whom
are members of trade unions. Their rights are protected by law, which
enforces normal working conditions and proper pay. Social insurance has
already been established for a considerable section of the workers.
Average wages and salaries were much higher in 1952 than in 1949, the
increases ranging from 60 to 120 per cent. The improved conditions of
the Chinese people are reflected not only in the steady increase of
their purchasing power, but also in the falling death rate and the
rising birth rate, as well as in the extraordinary eagerness displayed
by workers and peasants to increase their knowledge and improve their
qualification.

Planning Further Progress

The Chinese owe these achievements to the people’s democratic system
and to the guidance of the Communist Party, which is leading the
country along the sure road to economic prosperity.

An invaluable factor in Chinese economic progress is mutual
assistance
and close cooperation with the Soviet Union and the People’s
Democracies. Chu Teh, Vice-Chairman of the Central People’s Government
Council, said in an article entitled “The Great Friendship of the
Peoples of the Camp of Democracy and Socialism”: “The greater bulk of
Chinese imports from the Soviet Union consists of machinery and
industrial equipment. The prices of this machinery and industrial
equipment are 20-30 per cent lower than those prevailing in the British
or American market. In addition to machinery and industrial equipment,
the Soviet Union generously supplies China with the most advanced
scientific and technical assistance.”

The historic achievements of the Chinese People’s Republic cannot but
rejoice the hearts of millions throughout the world. To the labouring
masses of Asia, what the Chinese people have achieved and what they are
striving for is a beacon that brings a light of hope into the darkness
of their misery. Even people who can by no means be regarded as friends
of China are forced to acknowledge its achievements in building a new
life.

In successfully completing the economic rehabilitation of their
country, the great Chinese people have scored an outstanding peaceful
victory, won in spite of the efforts of internal and external enemies
to frustrate the building of the new China. This victory has laid the
foundation for another big advance of the Chinese People’s Republic, an
advance to the new and higher phase of extensive planned economic
development. This is the purpose of the first five-year plan which is
to be submitted for the approval of the All-China People’s Congress.